The problem with the UK is that tax is pretty much setup to destroy the "middle class". Anyone that is a PAYE (pay as you earn) employee gets taxed significantly more than anyone outside the system.
The common thing to do is to start your own company, pay yourself minimum wage and take the rest as dividends which get taxed at 20%. Then you also get to expense certain things and reduce your tax liability further.
It also screws over single earners significantly. A household where a single person makes 60k is _significantly_ worse-off than a household where two people make 30k each. Having your own company allows you to hire your SO and thus get double the tax free allowance even if only one of you is working.
It creates a tragedy of the commons situation. Anyone not doing the above gets absolutely shafted by the tax man. Anyone doing that, is taking advantage of everyone else paying full tax. As more and more people do that, less people are paying tax, so the government raises taxes further squeezing the middle class.
Edit: some people in the comments are saying this is not true, so it may not be. I don't do this, so I wouldn't know. Friends say they do this and have been trying to convince me that it's worth it. I don't know the exact details and I'm starting to doubt myself.
Further edit:
Had to check, but indeed the tax on dividends is lower. So between £12,571 to £50,270 your income is taxed at 20%, but as dividends it's 8.75%. Then regular income over 50k is taxed at 40% whereas dividends are taxed at 33.75%. You also don't pay national insurance on your dividend earnings, which further lowers tax. I'm guessing the 20% figure I was told is what it averaged out as. Sources:
I'm a little confused. If you're paying dividends then you have to pay a tax on the company profits first, which is going to be 19%.
So if the company declares a profit of 60k then it'll pay 11,400 in corporation tax, and then 20% on the remaining £48,600, for another £9,720. Total tax of £21,120. (There's a 1k allowance now for dividends, but it basically makes no difference here).
If you just paid tax& NI on that £60k you'd have total deductions of £16,417 [1], because there are significant allowances for income tax/NI.
So you'd definitely be better off just paying PAYE.
There is a gain if you can split the payments between two of you and pay you both as PAYE.
Yup, I am single earner earning £60k+ with a kid. Wife doesn’t work (extreme anxiety, working on it but takes time).
I am significantly worse off than if I was able to drop salary and she started working. Both with the tax bands but also with child benefit being removed once £60k has been hit. My friends were earning around £45k - £50k each - combined salary of £95k, and still received £80ish a month in child benefit. We lost out because I was earning £60k.
The only real benefit I get is being above the 40% tax bracket, I get a boost with my salary deduction for pension payment (pretax), but I am half expecting this to be raided soon, and I can’t pay enough into it anyway atm (cost of living crisis+ single earner for family renting in outer London).
In France, the household income is taxed if the relationship is official (not necessarily marriage, you have free, fast alternatives). You'll be taxed the same if both earn 30k or if only one earn 60k. If I take old and rounded references, in both cases, you'll be taxed 10% of what your household earn above 18k,and 30% above 48k. With a child, 10% above 22.5k and that's it (data from a few years ago, the brackets start a bit higher now).
Basically, one adult count as 1 part, a child count as .5 (except the third who count as 1 whole part do not ask me why), you take total income and divide it by the number of part, and check where it lands in the tax brackets.
I have the same problem in Canada and it's really frustrating. Our lifestyle would be better staying as is, but I get taxed insanely hard, even if my wife doesn't work.
Aren’t dividends taxed as income in the UK? I’m not certain but superficial googling seems to confirm it. They certainly are in other European jurisdictions so this “pay yourself dividends” does nothing to reduce tax paid.
In what European jurisdictions? For example in Slovakia dividends are taxed by a special tax rate (8% previous years, 10% from 2024) and that's all, so it's pretty good compared to the standard cca 20% (different tax rates, not sure which one applies when + there is some untaxed minimum but not much). In addition to that, if you are employed, you are paying (relatively huge) social and health insurance too, which you don't have to pay from dividends.
I’ve been a tax payer in Ireland, Switzerland and the UK. Dividends are treated as income in all three. However, from some superficial googling, it seems these 3 are not a particularly representative sample - without fully researching it, it looks like this approach to dividend income is not the way the majority do it although that doesn’t mean you save money by paying yourself dividends as the tax rates are often higher than income tax rates.
the overall tax rate is lower, you also dont pay social security contributions. try getting a 50K dividend only payment vs a 50K payment via payroll. it's night and day
Ok, but I was responding to the OP claim that dividends were subject to a flat 20% rate. This is not the case - dividend income is added to your earned income for income tax purposes.
It's added but taxed differently. You are correct, I got the details wrong. I should have just written there are tax advantages to not being PAYE. Writing a concrete number (especially when I wasn't sure about the details), was bad.
While the facts are largely correct ( though the government has moved to make it less attractive ) I think you have presented it in the wrong way - the problem is the advantageous tax environment for companies over people.
I tend to think the best way to persuade governments to close tax loopholes that the elite use is to encourage everyone to use them - ie if everyone had an offshore company trust then suddenly the government would stop dragging it's feet over them.
False. The problem with the UK is that middle class expenses are much higher because what was provided by the state at highly effective cost is now a cost they bear privately.
Housing and education is expensive because social housing was sold and marketised removing an anchor on rental and ownership prices.
Expensive finance enabled the marketisation of tertiary education and so now instead of no debt, middle class graduates have ~$100k.
Healthcare is being sold to, again, enable marketisation.
This all leads to a middle class that is legitimately worse off that it was. Nothing to do with taxation, everything to do with the removal of the social provision of a ladder into middle class for the next gen
While I'd agree these are problems - it's not true to say it's nothing to do with taxation - reducing the tax burden on the rich results in less funds for this sort of social provision.
Ahh yep, I agree with that as well. Having said that I think selling the assets and renting them back means that what tax revenue there is, is structurally at a disadvantage from the days when the UK was prepared to own assets
Dividend taxes depend on your income tax bracket and also affect it, so they are taxed as income. You get £2,000 tax free, then the rest is taxed as income.
> take the rest as dividends which get taxed at 20%
As someone who lives outside the UK, I find this astounding. Dividends should be taxed as income, not capital gains. Sure, it's one of the reasons why stock buybacks are more popular in the US than dividends (because stock buybacks are capital gains, not income), but that's beside the point. Dividends are not the growth of capital, they are the proceeds from capital.
Why? Dividends are already taxed income - they are payed out from company's earnings after taxes (etc), so ideally there would be 0% dividend tax, because otherwise they are getting double-taxed (unless for jurisdictions where the company income/profit tax is 0%).
The first tax is levied on the corporation's profits. This tax is collected regardless of whether the corporation ever pays a dividend. The tax is paid from the corporation's bank account.
The second tax is levied on the shareholder's profits (i.e. the dividend) and is paid from the shareholder's bank account.
The first tax is not on an individual's income and individuals may not freely enjoy the fruits of the corporation's profits for their personal ends. The money belongs to all shareholders. This is why there is very little leeway on using corporate funds to make purchases on items like cars - they are company cars, not private cars, and if the beneficiary leaves the company, they are supposed to lose access to company property. It is the freedom of the shareholder to decide what to do with the proceeds that makes it the shareholder's income and therefore subject to the second tax.
> The second tax is levied on the shareholder's profits (i.e. the dividend) and is paid from the shareholder's bank account.
Not necessarily, in our country the second tax is also payed by the corporation from the corporation account as a part of dividend payout.
> The first tax is not on an individual's income
Both the first and the second tax are on the same income. No activity took place between the first and second taxation.
> The money belongs to all shareholders.
What if there is one shareholder?
> This is why there is very little leeway on using corporate funds to make purchases on items like cars
The company is AFAIK not paying profit tax when buying a car, but it is paying profit tax before paying dividends.
> It is the freedom of the shareholder to decide what to do with the proceeds that makes it the shareholder's income and therefore subject to the second tax.
The company does not buy company property (like the mentioned cars) with taxed income, it buys company property with cash before taxation (or even better leases the car and then uses the rates to lower declared profits). So it's wrong to compare those two.
I understand why the dividends are double-taxed - some creative minds would otherwise find a way to get them completely tax-free. But it's a band-aid, not something fundamentally correct.
All money gets taxed over and over whenever it changes hands. There's nothing unique about dividends that make taxing them "double taxation". This was ridiculed long ago in [1]
How is that relevant in relation to dividends, which are from already taxed profits, so artificially lowering profit to evade tax also lowers dividends?
Regardless, corporate tax avoidance is well documented. Suggesting that because they avoided it once the benefactor needn't pay meaningful tax on receipt is borderline facetious.
> Regardless, corporate tax avoidance is well documented.
Yes. But taxing the revenue is a) already sort of done through VAT (if selling to public etc) and b) not a very good idea in general - it will make prices of everything higher for everyone. If a company is a low-margin mass-producer, their prices will be immediately +Tax%. This, to be popular, would mean the revenue tax would have to be low, which sort of defeats the original purpose.
Thats not true. Divident income is added to your normal income and taxed. There is a band and some free allowance and different buckets. But all in all it does not really matter if personal income comes from divident or work. Best would be to register yourself outside of the UK and live as a non domicile in the UK.
So all the comments made me start second guessing myself, so I went and checked. The difference is pretty staggering to me. You also don't pay national insurance on your dividend income, which helps. But you are right, you add the income from dividends to your regular income to figure out your tax bracket, but the rates are much lower:
You get to take 20% dividends freely even with a minimum wage in the UK? That’s cool but crazy if that’s all it takes to evade employment tax. Here in NL if your company mainly sells your own labour you’re only allowed to take dividends after paying yourself 2-3x the minimum wage and even that is restricted.
the tax squeeze for paye as a single earner sucks. the uk instead of growing the economy, tax revenues through innovation they would rather tax the hell out of the working masses
Most people in most countries don't see the value in tax - if you read any forum, people want to pay less tax and have better public services, which isn't really very achievable.
Some people would prefer to follow a US kind of model of cuts to public services and low tax.
Other people (including me) would rather be taxed higher in a more European model and have well-funded public services.
The current UK government seems to have found a fourth option - high taxes and dreadful public services.
I reassure you, it's pretty much the case everywhere.
I believe that stellar public services are just a myth that doesn't exists (at least in post 90's western Europe), despite the amount of money pored into it.
The problem is not coming from the taxes or the public services, but from the bureaucracy and the insane amount of norms and regulations that are at best questionable, and plummeting all kind of efficiency.
I am from France, and it is a catastrophe to see the amount of administrative bullshit public agents have to go through just to issue a simple document, and I thought it was the absolute worst... till I moved to Germany and I realized it was even worse, thanks god, it's only the spearhead of Western Europe, what wrong could happen...
This combined with the overall aging population which is preventing any form of further digitization or drastic changes, the low-wages in the public sector which are far from attracting the sharpest knifes in the kitchen drawer; you have a recipe for nightmare, inefficiency and down the line, hurt economy.
You might find it hard to believe, but it's significantly worse in the UK. We have significantly fewer doctors, nurses, hospital beds per capita, and pay less into healthcare.
That's surely not even cost-effective in the short term. It would be cheaper to pay to get them back working again.
The NHS is quite efficient I think compared to comparable health systems but it's massively under-resourced.
So it's all relative. It might not be "stellar" from your perspective, but France and Germany have probably among the best health systems in the world. The UK's used to be quite good only a few years ago.
I've always wondered if there's a way to more efficiently tax more aspects of the "business world."
By "business world" I mean business operations and interactions between businesses. I realize that to some extent these taxes would ultimately be passed onto consumers. However, I think there is an upper limit to which that can happen.
For example, I feel like there can be an added or increased tax on mergers and acquisitions. I'm thinking more "sales tax."
Another thought I've had is implementing a tax on advertisement viewership. I don't really know how that'd be implemented so I haven't put much thought into it.
Just TAX the rent-seekers and the speculators. Tax the $&%# out of them. Lower sales taxes to zero accept on luxury goods and a few other things like cigarettes, that sort of thing.
I wouldn't say "high" taxes. People like to say we've got European taxes and American services, but the UK tax burden is significantly lower than places like France, Sweden, and Germany. It's harder to compare services cos I've not lived anywhere else long enough to require public services.
To be fair so does France. Worse, actually. If you melon-scoop the most productive 15% of the population out of any country the productivity of the rest goes down quite a bit.
> The current UK government seems to have found a fourth option - high taxes and dreadful public services.
This is an attempt to kill the existing comprehensive services like NHS. The Koch Brothers Model -- slash funding, make something shitty, complain how it's shitty, use that to justify further slashing, repeat until you can privatize
Germany is similar. Housing costs are a part of this. As are rising food prices.
But the main thing people don‘t mention is that taxes are insane right now. In Germany at least, the tax brackets are not coupled to inflation. I earn close to the money in the headline and I‘m at the highest tax break. As per OECD, I‘ve paid 50% of my wage as income taxes. This is after my employer paid the same amount of tax for employing me as well. We pay the highest price on energy in Europe. I pay 20% VAT on everything I buy. My Government was close to earning a trillion dollars this year and they still say it‘s not enough.
Meanwhile we‘ve been getting report after report in the news that a family of four experiences no net income difference between 3K EUR and 5K EUR because the government decreases social financial support payments depending on supplemental income after the 3K Euro mark.
Through the governments policy, they are directly subsidizing rent and increasing landlord wealth by paying out rent support in cities. High tax and lax policies keep wages artificially down.
You have nothing to complain about. The higher education is completely free, the healthcare is mostly free of the highest quality, the infrastructure is top notch and the salaries are amongst the highest in the world.
> the infrastructure is top notch and the salaries are amongst the highest in the world
There is a reason why our economy is shrinking. Our infrastructure is eroding, our internet speeds and network availability are a joke and public transport is as chronically understaffed as it‘s late. Schooling is also among the worst in Europe.
Also, if you compare networth and savings to the rest of Europe, Germans tend to own little and have no savings.
High wages mean nothing if the government takes most.
I live in Romania. I have to wonder if any of the infrastructure, public transport or schooling are really better here than in Germany. It would be something, if it were true. Hopefully you can agree we are in Europe. So're Bulgaria and Hungary. Also places with better things than Germany, seems you think.
Maybe you should move here. The president is an ethnic german, so you know we're not xenophobic.
The thing is, due to social policies and supplemental payments, there is close to no difference in net income when working part time as opposed to working full time. We have a part time epidemic in Germany, and economists have already begun rattling swords to decrease part time work possibilities in the future.
The tax system is broken, the economy is tanking, the people are indifferent. The reality is this has been a slow decay of the British empire for many decades. All the money was being made via colonisation, nothing is made at home. Foreign money now enters to subsume many of the assets the Brits cannot maintain. The UK at this point is a shell corporation. I thought a business minded Rishi was going to do something but he's being held back by his peers and unfortunately it's too far gone to recover. We need a way for the country to make money, we need to be making a profit and that means we need to be investing significantly in producing next generation infrastructure on all levels. We don't do that. Countries in the middle east are reinventing themselves. Look at Qatar moving from pearls to oil and gas and then diversifying those investments further much of which is coming here to the UK. The country has rethink it's approach. Taxes aren't going to get lowered through efficient use of funds. It's going to happen by producing something of value for the rest of the world.
I agree that the UK has had a paper economy for a long time now, but to a lesser extent, so do other EU countries. Not that I don't think this is a mistake, only that it should show that this is not the issue.
The issue is pessimism, something the British excel at. Economic investment and stock markets obviously don't do well with that.
Unpopular opinion, but Brexit didn't _need_ to be a disaster. It was made so by the negativity surrounding it. A large part of the shit-show was investors getting spooked and moving abroad, because of all the doom-and-gloom it became a self fulfilling prophecy.
I can't help but feel the only way to achieve a middle class lifestyle in the UK at this point is to be a couple (alongside realistic expectations around housing location, too many people are hell bent on London for some reason). As a single person, getting on the property ladder and keeping your head above water on £60k would be difficult, yet as a childless dual income (DINK) couple it's a comfortable life in the Midlands or North of the country. If you add children to the mix, suddenly it's very difficult again.
The tax burden is insane nowadays. The 40% bracket is frozen at an insanely low level until at least 2028 AFAIK - it's hugely demoralising to know that anything I earn outside of my day job is taxed at 40% unless I want to squirrel the money away into a pension or buy shit I don't need to reduce my tax bill.
This is a great summary of my feelings as well. We're trying to be a single-earner family, and it's punishingly difficult due to the tax rules. My spouse basically needs to get a job just to take advantage of the tax rules, as her getting £20k/year job is the same as me getting a £45k/yr pay rise.
In the UK - 60,000 a year is more than enough to live on - except if you have a significant mortgage ( or are paying somebody elses via rent ) - with average interests rates in the region of 4.5 % if you have a 90% mortgage on the average UK house price ( 362,000 ) then your available income after mortgage and tax is more in the 15-20K range.
In my view that's a combination of letting the banks create too much money, leading to 'investment' in housing, and limited housing supply versus demand.
Does that make plumbers middle class, as they earn above that?
Personally I think middle class would be around £80-150k. (I know its not all based on salary.)
According to the BOE calculator[1] 50k in 2000 is 90k nowadays.
I think this country has a Freddo issue on wages and what certain demographic grew up with seems to be what society accepts.
Minimum wage is 23k, with an average UK wage of 28k. In ~10 years most people are going to be on minimum. Even some of the middle class according to this article (30k).
It's interesting. What does "middle class" really mean? For me it means something like "can comfortably afford nice things, but still has work". £60k/year would seem to qualify for that.
Yep. I'm on decent senior engineer London wages, living with my partners parents to save up for a house deposit, and even on good money and almost no expenses, it feels futile at times. So much of what I earn's gone on tax, then what's left quickly gets eaten away by bills, contributing to food shopping and the odd meal out. Just crazy. I don't know how most the population are surviving if London tech wages are getting squeezed this much. Really feels completely broken at the minute.
If you're hard-working and a skilled worker, it barely pays off these days. I pay more taxes as a percentage than people with vast amounts of inherited wealth living off the interest. It really feels like hard work is actually punished in this country at the minute. I don't really see an end in sight, either. The two main parties are virtually identical at this point, bar some minor differences in rhetoric on none issues like 'woke stuff'.
There doesn't seem to be any competent leadership in our politics anymore, no big ideas, no big plans. It all seems to boil down to making half-arsed memes about how bad the other party is, or completely meaningless slogans. Just maintaining the current status quo with a few tweaks here and there to little effect. Sorry for the rant, but this article resonates so much and I'm really angry at how things are here at the moment.
You’ve had one party in power for almost 14 years, and you’re trying as hard as you can to spread the responsibility evenly?
Do you recall what was happening when Jeremy Corbyn was the leader of Labor? The guy was getting bombarded by the press and the media. Could it be that his policies were actually going to change the status quo?
I'm not trying to spread the responsibility evenly, I'll say outright the responsibility almost entirely lies with the current party. But my criticism of the opposition is, it's been so unconvincing and has often lacked any real opposition that I don't hold any hope for them being able to make any significant change either. I include Jeremy Corbyn in saying the opposition has been unconvincing, his proposals on the economy were often naive at best. But I agree that the media in this country seems entirely designed to maintain the status quo at this point, rather than challenge it.
To add to vegancap's response, I'm quite confident Labour will raise taxes (they said as much). But what will they do with them? Will they be able to turn the ship around? Or merely increase the tax burden and leave people scrambling to pay the same bills from a smaller net income.
My concern is the latter. Though of course, no way of knowing for sure.
> If you're hard-working and a skilled worker, it barely pays off these days.
Part of me cannot stop thinking that people should just stop converging where already too many people live. If you can only find a job in London or San Francisco, start looking for something else, somewhere else.
I'll stop living in a megalopolis when I can make a decent living outside the megalopolis. As it stands, friends who moved out of London over Covid are now trying to move back.
I don't actually live in London (there's no way I could afford to), I remote work in the midlands and get the train in to London every couple of weeks. But I do agree that everyone living in London and San Fran for decent wages is part of the problem. It essentially makes those places unaffordable to people who've lived their all their lives, and actually doesn't even make that much sense for tech workers for example, who could work remotely and live anywhere anyway
What makes you say that? In theory they are much more efficient way of living for a given number of people ( assuming you invest appropriately in shared infrastructure ).
> The two main parties are virtually identical at this point
Below is a counterpoint to this idea, which I think is captured well in the first line, "Petrified fucking terror. That's the first thing you think when you look at Labour. A barely-concealed, buttoned-up, can't-sleep-at-night anxiety, lurking just behind the eyes. They're scared they'll fluff it. They're scared that in the white heat of the election campaign, the Tories will find some policy in their manifesto to weaponise against them and the whole thing will come crashing down."
Absolutely this. The current Labour leadership is, for all its faults, laser focused on actually winning the next election rather than making the party's long-term loyal supporters purr.
The PAYE system seems designed to plug the gap created by the wealthy through pushing what they should be paying onto the middle class. You can never expect to get ahead under such a system with wage stagnation and an increasing cost of living. The only way to address this is through closing the loopholes, which is less likely to happen under fourteen years of tory rule.
Absolutely correct. We just can't have a situation where multi-millionaires are paying less taxes than people working their arses off from the ground up. It seems like the most glaringly obvious problem in our society and economy. And it's clear that avoiding fixing this problem is just blatant protecting their own. I used to think the notion that the Tories were here just to protect their rich mates was slightly unfair and conspiratorial. But they've had 14 years, and the've let everyone but the super rich fall into decline, what else can I take from that?
It's going to be even more infuriating when they try to pull some big ideas out of the bag just before the election, because they've had so long to make meaningful change, but only decide to when their grip on power loosens...
I have a partner that's not willing to compromise over 20 miles in where we choose to live, unfortunately. And I have a terminally ill father to think about, so can't really up sticks. Plus, I lament the situation in Britain, but it doesn't seem meaningfully better in most other European countries at the minute either. If I was 23 again and single, I'd be on the plane to Norway right now. Yes their taxes are even higher, but at least you get functioning public services in return. Which can't be said about the UK. As for Ireland, their income taxes aren't much lower I don't think, although I love Ireland and have Irish blood.
Not for people earning more than 50k or so a year. Ireland’s income tax system is progressive in the extreme - those earning over 50k pay over 75% of the income tax collected despite constituting about 20% of the workforce. About a third of the workforce pay no income tax at all.
Believe it or not, yes. The UK has cheaper housing than Ireland, and comparable or greater salaries (depending on industry of course). Even moreso comparing Dublin and London. Both are expensive, but in Dublin even if you earn loads there are physically not enough houses. In London there is
I'm in a similar situation. High earner, not expecting much in inheritance. It feels like sitting on PAYE is the worst possible tax option. Sitting on large amounts of wealth is super easy, its just impossible to get there.
> The two main parties are virtually identical at this point, bar some minor differences in rhetoric on none issues like 'woke stuff'.
I disagree with this. Labour aren't floating the idea of scrapping inheritance tax.
True, but inheritance tax pales in comparison to some of the other loopholes, especially around capital gains and corporation tax. I'll keep an eye on Labours policies, but every time I try to go and read about their actual concrete policies, there don't seem to be any. I'm guessing it will all become clear when all the manifestos are released. So, hopefully I'm proved completely wrong here. I want to be proved wrong because then there's a hope someone will do something about it.
Pre 2008 crisis, that amount was equivalent to almost 120k USD and then just prior to Brexit it was about 90k in USD and today its about 75k US. So it used to be comfortable number.
Despite that, the UK is a fine country i will add. Things just work, cities are functional and livable, schools are free, and the NHS carries its weight - it is overloaded but if they introduce a small fee for GP visits and keep the big things like surgical interventions and cancer treatment free, it would maybe balance out its budget.
While wealth is not zero sum, neither is it infinite sum, and indeed some components (e.g. living space in desirable locations) are very much zero sum.
Wealth also has a tendency to agglomerate. We need wealth taxes now. Anything above say 2MM belongs to the People (remember them?) anyway, perhaps we continue to license some proportion of that back to the rich for entertainment value (and to provide a funding mechanism for potentially valuable but 'bonkers' projects that might otherwise go unfunded)
The UK seems to be uniquely hostile to the middle class. It sports a trifecta of:
1. High taxes. The marginal tax rate from 37k onwards is 40%, and that's just the income tax. On top of this there's national insurance (another couple of %).
2. Poor services and infrastructure. The roads are crumbling, massive potholes even in the richets towns and cities. Public transport is falling apart. There have been near constant strikes or disruptions in the past couple of years.
3. High concentration of wealth and a significant "housing as an investment" culture.
Unless you are born into wealth or happen to luck your way into finance in London - the only high paying industry and location - you'll earn fairly little money. The government then takes a large portion of this money and gives you very little in return. Both the infrastructure and the living standards of former Eastern Bloc countries are now better than the average in the UK.
A friend of mine summed it up neatly: the UK acts as if it was a first world country, whereas in reality it is a developing country. It needs to start thinking like a developing country, the policies it adops need to be that of a developing country.
I'm an expat, but I like it here and I really like the people. It breaks my heart how much of a shitshow the country has become and how much each day the hope of a better tomorrow slips away.
Compared to where? Taxes in the UK are pretty middle of the road when compared to other Western democracies. A bit higher than in some, a bit lower than in others. That's not to say that the tax system is particularly fair, but the overall tax burden is not unusually high.
Without sounding too much like a conspiracy theorist, the UK has always seemed to me like a fairly 'sewn up' place with a lot of sheep and a few wolves.
If you show too much enthusiasm for not being a sheep you're gently reminded that the exit is always open: before it was the colonies (either by choice or by transportation!) today it's Australia/NZ or America - the door is always open and it's trivial to get into either one of those countries (by marriage)
Thatcher fought the system and tried to free people (please don't laugh) and set a lot of people on an upward trajectory, being able to own their first home which is key to building wealth and a hugely powerful black PR network set about demonising her the moment she left office. She's now utterly reviled despite winning a gigantic share of the vote on several occasions and doing a huge amount to set the working classes free of rentiers. The 'public housing selloff' in the UK wouldn't have been a scandal if new public housing had been built but the idea of building that stuff just to sell it to the 'proles' really didn't go over well with those who hold the purse strings so they basically vetoed any more ever being built from that point on. Now it's even worse, many new housing developments are shared ownership, even with cash you can't buy outright, you have to accept owning only a share and paying rent forever.
Also it's virtually impossible to build your own house or even have anything constructed that has any sort of interesting architecture. The difference between UK small towns and French/German small towns is ludicrous - in Europe the architecture has long since adapted to modern living patterns and styles, in the UK the houses still need to be built with a certain 'look' because 'that's the UK look' and it's so tedious.
Vested interests in the UK have simply been there too long to accept any challenge to their power. They just point to the door.
> shared ownership... you have to accept owning only a share and paying rent forever.
I don't think that's true. I have friends who did shared ownership, and pretty universally you can ratchet up how much you own after the first year (assuming you can get the mortgage for it). So just, like, buy the rest and you won't pay rent.
That's a lovely theory but shared ownership allows prices to rise astronomically because it allows what's basically double-mortgaging - you get a mortgage on the part you own and pay rent on the rest (which of course is you paying the developer's loan) which is accepted because the risk is shared between the developer and the mortgage issuer, who of course have an 'arrangement' because only some banks will issue mortgages to some shared ownership properties - there's an 'approved lender' list for each development.
So 'just buy the rest' becomes almost comically impossible, which is the idea. It's intrinsically gross. I honestly don't think it should be allowed, it's masking a problem which is insane real estate values which have no tie to reality.
They're software engineers (big surprise there), so generally up towards the 10% or so. But you said "almost comically impossible", and I really think that's overstating it.
I suspect there's at least a grain of truth to what you write.
The housing stock (even newly built) in the UK is atrocious. The quality is really poor, unless you pay a massive premium. And I agree with you: it all looks the same dreary brown. Everything has to be identical baby diarrhea brown and the same design.
And somehow nobody seems to be keen to demolish and replace the terrible 60s-70s houses either. Why is that? It costs too much? Or someone, somewhere actually enforces that the design must remain as it is?
I have yet to see a new development where I can say: oh this looks nice and positive. I don't know who to blame for this, whether it's some funky conservation societies who wield way too much power, or whether it is self inflicted dreariness that people somehow like.
There's no positivity left. All the positive people, as I said, were encouraged to leave.
What's left is hugely corrupt local councils (that control planning) all staffed by the most bitter venal types you've ever met who all have the same mentality - 'I can't fix it myself but if I let someone else fix it for me that means they're better than me, and I can't accept that' so they choose to rule over ruins than step aside. Usually combined with lots of racism and alcoholism.
It all shows through in the television. The cynicism and sarcasm that pervades British television is so telling once you see it from a distance.
> whether it is self inflicted dreariness that people somehow like
Or at least get a job, writting crude unjust-world-justification blogspam. Obviously they lack noble blood and inflicted this upon themselves. If you measure the noose to cheek ratio, they all fall short of an Elon.
Damn those rich. If only we could take their riches and divide it amongst ourselves, then it would have been a paradise on Earth! Wait, comrades, why am I in the gulag, where are you dragging me... Please don't shoooot...
Yes, because £60k isn’t really a middle class income anymore.
After income tax it leaves about £3,400 a month. Rent or a mortgage, council tax, energy and food will take the vast majority of that, making it very hard to build wealth and get ahead - even without kids in the mix.
And yet a £60K household income (two adults, no kids) still makes you better off than 88% of the population. [1]
I think a lot of people on comfortable incomes have absolutely no idea how privileged they are.
I also know people who complain about their financial situation in the same breath that they contemplate spending £15K/year or more per child on private education, in spite of having good state schools available.
> a £60K household income (two adults, no kids) still makes you better off than 88% of the population
That is before taxes and redistribution though. People without income or with _de minimis_ income would get their housing cost paid (which costs £20k-£30k per year in London, i.e. 25-40k of pre-tax salary), their council tax bill paid, their TV licence fee waived, prescription and dentistry fees waived, childcare subsidised, and would get £400 of spending money per person on top for bills, food etc.
Which is why people on zero income in London can afford to have 2-3 kids, but two people on £50k combined income cannot.
This is the problem with basing things on people's own stories. It doesn't matter where people are in life, everyone likes more and hates less. That's why you can have two people on exactly the same income and have one claim to be in poverty while the other says they have everything they've ever wanted. The former cannot bare to think of losing any of what they have while the latter never had nor wanted it in the first place.
Generally speaking it all starts when you're young. The best is having poor/tight parents. The worst that can happen is you get a poorly paying job yourself and consider this normal. But there's a strong chance you'll get a better paying job and not ever have to worry about money. The worst is having middle class parents who spend their money. Now even if you get a job as well paying, which isn't guaranteed, you'll simply have what you think is normal. But there's a strong chance you'll get a worse paying job and always struggle with money.
> £3,400 a month. Rent or a mortgage, council tax, energy and food will take the vast majority of that
If we're talking a mortgage it won't take the majority of that. Most people are paying no more than a couple of hundred in interest on their mortgage, many pay much less. The repayments aren't "taken", they are yours and are paying back the loan on the house. In other words, they are building wealth.
It's rent and consumption driven by lifestyle inflation that traps people in a cycle of not building any wealth. Mortgages are for the wealth-building class and are therefore a good deal.
So, yeah, earning £60k isn't what makes you middle class any more. It all depends on whether you own a house or not.
The accumulated inflation around Europe since Covid is in range 20-50% or higher. The real estate prices increase exceeded inflation. Tax free allowances are now below poverty, highest tax brackets kick in for salaries barely supporting a couple with one child. Welcome to precarious Europe.
The common thing to do is to start your own company, pay yourself minimum wage and take the rest as dividends which get taxed at 20%. Then you also get to expense certain things and reduce your tax liability further.
It also screws over single earners significantly. A household where a single person makes 60k is _significantly_ worse-off than a household where two people make 30k each. Having your own company allows you to hire your SO and thus get double the tax free allowance even if only one of you is working.
It creates a tragedy of the commons situation. Anyone not doing the above gets absolutely shafted by the tax man. Anyone doing that, is taking advantage of everyone else paying full tax. As more and more people do that, less people are paying tax, so the government raises taxes further squeezing the middle class.
Edit: some people in the comments are saying this is not true, so it may not be. I don't do this, so I wouldn't know. Friends say they do this and have been trying to convince me that it's worth it. I don't know the exact details and I'm starting to doubt myself.
Further edit: Had to check, but indeed the tax on dividends is lower. So between £12,571 to £50,270 your income is taxed at 20%, but as dividends it's 8.75%. Then regular income over 50k is taxed at 40% whereas dividends are taxed at 33.75%. You also don't pay national insurance on your dividend earnings, which further lowers tax. I'm guessing the 20% figure I was told is what it averaged out as. Sources:
https://www.gov.uk/tax-on-dividends
https://www.gov.uk/income-tax-rates